What do I have to do to trade stocks?
You need to have a CDS account. The process is very easy, just call one of 27 stock brokers and collect the registration form. Fill the form and submit with a copy of the national identity card and utility bill (within last 6 month) that proves your address to the broker. Generally within 2-3 working days your CDS account will be created.
You may call the brokerage office to find out whether your CDS account is created. When it's ready, you may call your advisor to ask him to make your first transaction.
** above listed are the minimum requirements and you may provide additional details based on the requirements by the selected broker.
I am no rich! How much money is needed to start trading?
You may even start with Rs. 100 depending on the stock that you select to buy. Generally stocks trade in lots of 100. Therefore if you wish to buy a stock that's trading around Rs. 50, to buy 100 shares you will need about Rs. 5000 (50x100) + 56 (rough commission = 1.12%*).
Similarly there are companies that trade at very low prices e.g. around Rs. 0.80. Assuming that you are planning to buy 100 shares of such stock then your total cost would be about Rs. 80 (0.80x100) + 15.36 (rough commission of 1.12% subject to a minimum brokerage of Rs. 10 and a minimum CDS fee of Rs. 5. )
So really you can start with any amount. Just go for it. You can invest more as you gather knowledge about them.
*This transaction cost is for transactions up to Rs. 50 million. For transactions above Rs. 50 million the cost will include a minimum brokerage of 0.2% and other costs amounting to 0.4125% of the value of the transaction.
Need some help with filling the forms?
In order to get the CDS account, you must fill the following forms. In addition to these your broker may request you to fill in more information depending on different services that they offer. Most information requested in these forms are very straight forward, nevertheless you may wonder what the below really means
Duly completed CDS Forms 1 & 1A;
A copy of the NIC;
- If you don't have your NIC a copy of the Passport should be provided.
- If you don't have either the NIC or a Passport then a copy of the Driving License should be provided (with an affidavit affirming the NIC number and that both NIC and Passport are not available);
- If your current address is different from the address in your NIC, a utility bill to prove your residence;
- If the above utility bill is in your parents name proof of relationship should also be provided.
How do I know, which stocks to buy?
That's what the advisor is there for! Every brokerage has multiple advisors. When you create your account they will assign an advisor for you. He is your expert, you may call him or meet him to find out what stocks are the best stocks to invest in the market. Your advisor too may have certain questions for you, such as whether you are looking for a long/medium/short term investment, amount of money that you are planning to invest initially, etc.
You may be a school teacher, a chef or an architect. Just as you are experts in your fields, advisors are the experts in stock market domain. Get the best from them.
Nevertheless it is always advised that you too learn as much as you could about the market. More knowledge about stock markets can only make you wiser and richer!
How fast can I make money in the Stock Market? What is the minimum guaranteed return?
The return (profit) you make from a stock is as simple as buying the stock at a lower price and selling at higher price*. After deducting buying commission (1.12%) and the selling commission (1.12%) you will get your net profit. Therefore your returns depend entirely on the price movement on the stocks you bought. Price can move in either direction for various reasons.
So simply there is no guaranteed return in stock market investments nor can we say how fast you can make money. In fact you could well lose your money if you do not select your stocks wisely.
Your returns entirely depend on how wisely you select your stocks.
*There are other forms of returns from stocks such as dividends.
How fast can I take my money back?
If you sell your stocks today your account will be credited in 3 working days from today. Therefore you can take the money back within 3 working days of any day that you select to exit your stocks. Nevertheless if you suddenly decide to exit your stocks, you might have to sell the stocks at the price prevailing at the market as at that given date. This might probably not be the desired price at which you wanted to sell the stocks.
Is my money safe in the Stock Market?
First of all you are only buying shares of a company or companies. Stock exchange and the brokerages are only the parties that facilitate these transactions. Having shares of a company is almost like you own a small % of that company.
Performance of the stock depends on how successful or unsuccessful the company is. If the company performance or the information about the company is favorable, most probably the share prices may go up, if the information is unfavorable, stock prices may affect adversely. Therefore the safety of your money depends almost entirely on how well the company performs and information circulating about the company.
How can I lose money in Stock Markets?
Risks are common to any investment. One of the main risks of share trading would be the possible drop in value of shares you've bought. But if you buy shares after careful consideration of the performance of the company then it is unlikely that you will lose. However, Economic, Political, Social, Technology and various other conditions could also affect the share prices.
One way that you could possibly minimize your risk is by investing in different companies in different sectors. As it is commonly said 'Don't put all your eggs in one basket'.
But always remember 'Never invest more than you can afford to lose'.
I want to start trading stocks, what advise would you like to give me?.
If the stock trading is new to you, it's very important that you gather as much knowledge about this domain as possible. We would recommend for you to observe the market, more specifically few selected stocks for few days. Consider that you have bought them with paper money (not real money) now keep an eye on to see how your money is progressing. This will give you a good feel of how prices fluctuate with you having to invest your actual money. Practice makes it perfect!
Further read as much as you can. The more you read about the information related to stock markets and the Colombo Stock Exchange the more it gears you up for the real thing. Especially with the power of the internet, no information is far away from any person. Knowledge is power!
Talk to an expert, who you can trust and who can give you honest opinion about the state of the market, good stocks that you can invest in.
When you feel you are equipped listen to your instincts!
Can anyone open CDS Account?
Of course, if you are above 18 years of age and have your National Identity Card you can open a CDS account.
Is it a must to open a CDS account if I am to buy shares?
Yes.
Further, if you are subscribing in a new company through an IPO you will have to open a CDS account because share certificates are not issued any more.
My Advisor never has time for me. I don't think I am getting a fair treatment.
Most investment advisors are very busy simply given the fact that the CSE has experienced an exponential growth over the last few years. Therefore, they naturally have very little time with each investor within the market hours. If you feel that your advisor does not give you enough attention please re think whether you are pushing for the information enough. Therefore, part of the blame should also come to you for not being able to extract the information you were seeking.
Nevertheless, if you still believe that your advisor is not giving you proper attention you may anytime request the broker to change your advisor or select another advisor of a different brokerage where you know is generally good.
Why should I invest in the Stock Market and not in a savings account or a fixed account? What are the additional benefits?
If you invest your savings in a bank deposit you are sure to get an interest at the end of each month, (unless otherwise the bank goes bankrupt!!!) However, the return you get is fixed. If you invest in the share market with the correct knowledge and a bit of caution, your returns could best be explained as unlimited. But you should also keep in mind that the share prices always fluctuate and there is a risk that you will make a loss. You should only invest in the stock market if you can take that risk.
Every investment has its pluses and minuses. It is up to you to decide which investment best suits you based on your expectations and the amount of risk you are willing to take. As they say, higher the risk higher the return!
How do I pay for the share I buy?
You have to deposit a sum that is equivalent to the value of the shares you buy plus the commission, to the bank account of your broker within 3 market days of the trade occurring (by T+3).
What if I am unable to pay during he period?
Your broker will be obliged to sell your shares within 5 market days of the trade occurring (by T+5) and recover the monies owing to them if you do not pay for your shares within three market days of the trade occurring (by T+3).
Can I trade on my own without a Broker?
Most brokers today offer online trading facilities where the investors themselves can place orders from wherever they are using internet. Nevertheless you must check if your broker provides such facility, if yes, you may have to request for that facility.
This provides complete independence for the investor to play the market with their own consent. There are pluses as well as negatives in this. Pluses are that you may act promptly and cut down some serious delay in placing orders. The negative side can be that, as you are on your own, the tendency of making mistakes is high unlike in a scenario when you are talking to your advisor where they could provide you with greater insights of what is right and wrong.
Therefore the correct approach would be to strike a balance of both; you can be independent when placing orders but it is highly advised that you keep in touch with your advisor on regular basis to hear the hot news in the market.
Sometime all of us need a reality check!
My English is not that good. Is it a problem?
Not at all! Learning how to read stocks is very easy. Further most brokerages provide information in native languages (both in Sinhala and Tamil). In fact even if you are very good in English, once you build a good relationship with your brokers, most likely you will end up talking to them in your native language as this is the case in many business relationships in Sri Lanka.
So again, by all means you don't need to speak good English to trade stocks.
Is it true that Colombo market is controlled by an handful of individuals and others are playing to their tunes?
Well, we really don't know the answer to this. As you may be aware Colombo exchange is still a smaller exchange compared to some of the exchanges in developed countries. What is important to note is that, this very myth or fact is there against most of the very big and developed markets as well. So frankly speaking, you should really not worry too much about these when nobody has a direct answer, just focus on whether there are opportunities for you to benefit. And what is more important to understand is that economic and market conditions in most circumstances are more powerful than the power of few individuals. Therefore if the country's political, economic, social and technology trend is looking good, those are even better reasons why you should not be concerned about such matters when investing in the market.
Nevertheless if you are convinced that this is indeed a fact and your money is at risk due to this, we suggest you consider alternative investment vehicles.
Copyright: Sri Lanka Equity Analytics
www.srilankaequity.com
You need to have a CDS account. The process is very easy, just call one of 27 stock brokers and collect the registration form. Fill the form and submit with a copy of the national identity card and utility bill (within last 6 month) that proves your address to the broker. Generally within 2-3 working days your CDS account will be created.
You may call the brokerage office to find out whether your CDS account is created. When it's ready, you may call your advisor to ask him to make your first transaction.
** above listed are the minimum requirements and you may provide additional details based on the requirements by the selected broker.
I am no rich! How much money is needed to start trading?
You may even start with Rs. 100 depending on the stock that you select to buy. Generally stocks trade in lots of 100. Therefore if you wish to buy a stock that's trading around Rs. 50, to buy 100 shares you will need about Rs. 5000 (50x100) + 56 (rough commission = 1.12%*).
Similarly there are companies that trade at very low prices e.g. around Rs. 0.80. Assuming that you are planning to buy 100 shares of such stock then your total cost would be about Rs. 80 (0.80x100) + 15.36 (rough commission of 1.12% subject to a minimum brokerage of Rs. 10 and a minimum CDS fee of Rs. 5. )
So really you can start with any amount. Just go for it. You can invest more as you gather knowledge about them.
*This transaction cost is for transactions up to Rs. 50 million. For transactions above Rs. 50 million the cost will include a minimum brokerage of 0.2% and other costs amounting to 0.4125% of the value of the transaction.
Need some help with filling the forms?
In order to get the CDS account, you must fill the following forms. In addition to these your broker may request you to fill in more information depending on different services that they offer. Most information requested in these forms are very straight forward, nevertheless you may wonder what the below really means
Duly completed CDS Forms 1 & 1A;
A copy of the NIC;
- If you don't have your NIC a copy of the Passport should be provided.
- If you don't have either the NIC or a Passport then a copy of the Driving License should be provided (with an affidavit affirming the NIC number and that both NIC and Passport are not available);
- If your current address is different from the address in your NIC, a utility bill to prove your residence;
- If the above utility bill is in your parents name proof of relationship should also be provided.
How do I know, which stocks to buy?
That's what the advisor is there for! Every brokerage has multiple advisors. When you create your account they will assign an advisor for you. He is your expert, you may call him or meet him to find out what stocks are the best stocks to invest in the market. Your advisor too may have certain questions for you, such as whether you are looking for a long/medium/short term investment, amount of money that you are planning to invest initially, etc.
You may be a school teacher, a chef or an architect. Just as you are experts in your fields, advisors are the experts in stock market domain. Get the best from them.
Nevertheless it is always advised that you too learn as much as you could about the market. More knowledge about stock markets can only make you wiser and richer!
How fast can I make money in the Stock Market? What is the minimum guaranteed return?
The return (profit) you make from a stock is as simple as buying the stock at a lower price and selling at higher price*. After deducting buying commission (1.12%) and the selling commission (1.12%) you will get your net profit. Therefore your returns depend entirely on the price movement on the stocks you bought. Price can move in either direction for various reasons.
So simply there is no guaranteed return in stock market investments nor can we say how fast you can make money. In fact you could well lose your money if you do not select your stocks wisely.
Your returns entirely depend on how wisely you select your stocks.
*There are other forms of returns from stocks such as dividends.
How fast can I take my money back?
If you sell your stocks today your account will be credited in 3 working days from today. Therefore you can take the money back within 3 working days of any day that you select to exit your stocks. Nevertheless if you suddenly decide to exit your stocks, you might have to sell the stocks at the price prevailing at the market as at that given date. This might probably not be the desired price at which you wanted to sell the stocks.
Is my money safe in the Stock Market?
First of all you are only buying shares of a company or companies. Stock exchange and the brokerages are only the parties that facilitate these transactions. Having shares of a company is almost like you own a small % of that company.
Performance of the stock depends on how successful or unsuccessful the company is. If the company performance or the information about the company is favorable, most probably the share prices may go up, if the information is unfavorable, stock prices may affect adversely. Therefore the safety of your money depends almost entirely on how well the company performs and information circulating about the company.
How can I lose money in Stock Markets?
Risks are common to any investment. One of the main risks of share trading would be the possible drop in value of shares you've bought. But if you buy shares after careful consideration of the performance of the company then it is unlikely that you will lose. However, Economic, Political, Social, Technology and various other conditions could also affect the share prices.
One way that you could possibly minimize your risk is by investing in different companies in different sectors. As it is commonly said 'Don't put all your eggs in one basket'.
But always remember 'Never invest more than you can afford to lose'.
I want to start trading stocks, what advise would you like to give me?.
If the stock trading is new to you, it's very important that you gather as much knowledge about this domain as possible. We would recommend for you to observe the market, more specifically few selected stocks for few days. Consider that you have bought them with paper money (not real money) now keep an eye on to see how your money is progressing. This will give you a good feel of how prices fluctuate with you having to invest your actual money. Practice makes it perfect!
Further read as much as you can. The more you read about the information related to stock markets and the Colombo Stock Exchange the more it gears you up for the real thing. Especially with the power of the internet, no information is far away from any person. Knowledge is power!
Talk to an expert, who you can trust and who can give you honest opinion about the state of the market, good stocks that you can invest in.
When you feel you are equipped listen to your instincts!
Can anyone open CDS Account?
Of course, if you are above 18 years of age and have your National Identity Card you can open a CDS account.
Is it a must to open a CDS account if I am to buy shares?
Yes.
Further, if you are subscribing in a new company through an IPO you will have to open a CDS account because share certificates are not issued any more.
My Advisor never has time for me. I don't think I am getting a fair treatment.
Most investment advisors are very busy simply given the fact that the CSE has experienced an exponential growth over the last few years. Therefore, they naturally have very little time with each investor within the market hours. If you feel that your advisor does not give you enough attention please re think whether you are pushing for the information enough. Therefore, part of the blame should also come to you for not being able to extract the information you were seeking.
Nevertheless, if you still believe that your advisor is not giving you proper attention you may anytime request the broker to change your advisor or select another advisor of a different brokerage where you know is generally good.
Why should I invest in the Stock Market and not in a savings account or a fixed account? What are the additional benefits?
If you invest your savings in a bank deposit you are sure to get an interest at the end of each month, (unless otherwise the bank goes bankrupt!!!) However, the return you get is fixed. If you invest in the share market with the correct knowledge and a bit of caution, your returns could best be explained as unlimited. But you should also keep in mind that the share prices always fluctuate and there is a risk that you will make a loss. You should only invest in the stock market if you can take that risk.
Every investment has its pluses and minuses. It is up to you to decide which investment best suits you based on your expectations and the amount of risk you are willing to take. As they say, higher the risk higher the return!
How do I pay for the share I buy?
You have to deposit a sum that is equivalent to the value of the shares you buy plus the commission, to the bank account of your broker within 3 market days of the trade occurring (by T+3).
What if I am unable to pay during he period?
Your broker will be obliged to sell your shares within 5 market days of the trade occurring (by T+5) and recover the monies owing to them if you do not pay for your shares within three market days of the trade occurring (by T+3).
Can I trade on my own without a Broker?
Most brokers today offer online trading facilities where the investors themselves can place orders from wherever they are using internet. Nevertheless you must check if your broker provides such facility, if yes, you may have to request for that facility.
This provides complete independence for the investor to play the market with their own consent. There are pluses as well as negatives in this. Pluses are that you may act promptly and cut down some serious delay in placing orders. The negative side can be that, as you are on your own, the tendency of making mistakes is high unlike in a scenario when you are talking to your advisor where they could provide you with greater insights of what is right and wrong.
Therefore the correct approach would be to strike a balance of both; you can be independent when placing orders but it is highly advised that you keep in touch with your advisor on regular basis to hear the hot news in the market.
Sometime all of us need a reality check!
My English is not that good. Is it a problem?
Not at all! Learning how to read stocks is very easy. Further most brokerages provide information in native languages (both in Sinhala and Tamil). In fact even if you are very good in English, once you build a good relationship with your brokers, most likely you will end up talking to them in your native language as this is the case in many business relationships in Sri Lanka.
So again, by all means you don't need to speak good English to trade stocks.
Is it true that Colombo market is controlled by an handful of individuals and others are playing to their tunes?
Well, we really don't know the answer to this. As you may be aware Colombo exchange is still a smaller exchange compared to some of the exchanges in developed countries. What is important to note is that, this very myth or fact is there against most of the very big and developed markets as well. So frankly speaking, you should really not worry too much about these when nobody has a direct answer, just focus on whether there are opportunities for you to benefit. And what is more important to understand is that economic and market conditions in most circumstances are more powerful than the power of few individuals. Therefore if the country's political, economic, social and technology trend is looking good, those are even better reasons why you should not be concerned about such matters when investing in the market.
Nevertheless if you are convinced that this is indeed a fact and your money is at risk due to this, we suggest you consider alternative investment vehicles.
Copyright: Sri Lanka Equity Analytics
www.srilankaequity.com
